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TN Law Aims to Make Payer Contract Management More Predictable

A new Tennessee law aims to stabilize payer contract management for providers by stopping payers from unexpectedly changing claims reimbursement rates.

April 12, 2017 - Earlier this week, Tennessee Governor Bill Haslam signed the Provider Stability Act into law, which intends to increase transparency and accountability for payer contract management.

Effective Jan. 1, 2019, the law will require payers in the state to give providers a 60-day notice regarding claims reimbursement rate changes if the policy change is at the sole discretion of the payer.

The law will also prohibit payers in the state from changing a provider’s fee schedule more than once within a 12-month period and mandate that payers provide notice of any provider fee schedule changes at least 90 days prior to the modification’s effective date.

The payer contract management law, however, will not apply to federal or state government healthcare programs, such as Medicare and Medicaid. Payers with healthcare contracts that base fee schedules on a percentage of a current government healthcare fee schedule will also not be subject to the new law.

Other exceptions to the law include any claims reimbursement changes for prescription drugs, immunizations, injectable, supplies, and medical devices that are based on some type of price index or maximum allowable cost pricing formula as long as the payer does not establish the price index.

Most value-based purchasing contracts will also be excluded from the law’s notification regulations and claim reimbursement rate restrictions.

The Tennessee Medical Association (TMA) hailed the Provider Stability Act as the first healthcare law of its kind in the US that protects providers from common payer contract management practices that allow payers to reduce claim reimbursement rates at any time.

“This is a huge win for physicians and all healthcare providers in Tennessee,” said Keith G. Anderson, MD, TMA President. “TMA listened and has responded to members’ growing frustrations by bringing some stability and predictability to the marketplace.”

The state medical association argued that payers oftentimes disrupt the patient-provider relationship when they enforce “one-sided, ‘take-it-or-leave-it rate cuts.” Since many providers cannot afford to accept the unanticipated claims reimbursement rate reduction from the health plan, some choose to stop providing the service or drop out of the plan’s network.

Payers reduced provider fee schedules by 5 to 12 percent per market in 2012, according to a McKesson report.

Some payers decreased their claim reimbursement rates by terminating old agreements in favor of new ones that favor the health plan, Rob Saunders, MHA, from McKesson Healthcare Business Consulting Solutions explained.

But others enacted amendments to their contracts by sending notifications to providers explaining that rates are changing to streamline or improve competition, he added. If providers do not respond with 30 to 45 days, payers take the lack of response as acceptance of the rate change.

Providers may also have limited options when it comes to contracting with payers. A recent Health Affairsstudy found that payers with 15 percent of more of the market shared in a region negotiated office visit prices that were 21 percent lower than those set by payers making up just 5 percent or less of the market.

Many providers cannot risk their patient volumes and drop out of a plan’s network if the payer dominates the local market. Providers also cannot avoid signing off on contract clauses that allow payers to change claims reimbursement rates mid-contract period.

As a result, patients also end up paying more. Patients either pay higher out-of-network fees for the same service if they want to continue seeing the same providers or they must find another doctor in the network, TMA explained.

The new law will hopefully prevent these scenarios and improve the patient-provider relationship, the organization added.

TMA and one of the legislation’s sponsors Senator Bo Watson have been advocating for similar payer contract management regulations since 2014 when the law’s predecessor, the Healthcare Provider Stability Act, was introduced. However, payers criticized the bill back then, claiming it would hurt consumers.

“Limiting health plans' ability to adjust for changes in cost or coding in their contracts with providers undermines the goal of affordability and could increase healthcare costs for consumers,” Clare Krusing, America’s Health Insurance Plans Deputy Press Secretary at the time toldThe Nashville Post.

The most recent Provider Stability Act, however, may be a sign to providers that payer contract management practices are about to change. Tennessee providers are not the only physicians facing sudden claims reimbursement rate changes and the passage of the bill this time around may signal more state legislators to introduce similar legislation.